How Master Vendors Quietly Control Umbrella Choice

How Master Vendors Are Quietly Controlling Umbrella Choice — And Why It Breaches Regulations

Across the UK contracting sector a growing problem is emerging. Increasing numbers of contractors are reporting that master vendors end clients and even NHS trusts are restricting which umbrella companies they are allowed to use. Instead of offering genuine freedom of choice these organisations present fixed Preferred Supplier Lists and direct contractors to choose only from those options.

On the surface this is presented as a compliance measure. In practice it creates a controlled market that benefits a small cluster of umbrella companies and the networks that sit behind them.

A Market Controlled by Interlinked Groups

A closer look at the industry shows that much of the umbrella market is shaped by two main accreditation bodies – FCSA and Professional Passport. Many of the largest umbrella companies sit under interconnected ownership structures but almost all of them feed into one of these two schemes. FCSA umbrellas dominate agency PSL lists and many well known brands appear under its accreditation even though they link back to shared owners and investment groups. Professional Passport presents itself as an alternative yet a significant number of umbrellas under its approval have later been exposed as tax-avoidance models or have collapsed following HMRC action. With so many umbrellas sitting under either FCSA or PP accreditation contractors are often choosing between brands that ultimately fall under the influence of just these two bodies. The result is a market that looks diverse on the surface but in practice is controlled by a very small number of organisations with substantial power over which umbrellas agencies promote and which options contractors are steered into.

Why Forced PSL Lists Breach the Conduct Regulations

The Conduct of Employment Agencies and Employment Businesses Regulations 2003 make it clear that a contractor cannot be forced to use any additional service as a condition of being offered work. Regulation 5 states that an agency must not make its work-finding services conditional on the worker using another service or business connected to the agency. This includes umbrella companies payroll services and any financial provider the agency benefits from. Put simply an agency or end client cannot lawfully insist that a contractor uses a PSL umbrella nor can they restrict or penalise a contractor for choosing their own umbrella company.

Despite this contractors regularly hear:

• “You can only use a PSL umbrella.”

• “Your preferred umbrella is not approved so you must switch.”

• “You will be removed from the assignment unless you use one of our chosen umbrellas.”

These practices breach Regulation 5 unless the umbrella is proven unlawful or genuinely unsafe. Simply not being on a PSL list is not a lawful or valid reason to deny a contractor their choice.

April 2026 JSL Regulations Will Increase Pressure — And Risk

When the new JSL rules come into force in April 2026 supply-chain transparency obligations will become stricter. Many agencies assume this gives them a licence to tighten their PSL lists even further. In reality it exposes them to more liability.

If agencies force contractors into umbrellas that later fail JSL compliance tests the responsibility may lie with the agency or end client not the contractor. Reducing choice now could create far greater legal and financial exposure in the future.

Real Scenarios Contractors Face — And How They Can Protect Their Rights

Scenario 1 — A Contractor Chooses a Compliant Umbrella Not on the PSL

A contractor selects a reputable umbrella but the master vendor rejects it.

Contractor Action: They can cite the Conduct Regulations ask for written justification and request evidence of any compliance concern. Most agencies retreat once required to justify their decision formally.

Scenario 2 — Agency States Only FCSA or PP Umbrellas Are Allowed

The contractor is told accreditation is mandatory.

Contractor Action: They can ask for the legal basis for requiring membership of a private body and request proof that their chosen umbrella is non-compliant. There is no law requiring FCSA or PP membership.

Scenario 3 — Contractor Threatened With Role Removal

A contractor insisting on their right of choice receives pressure to switch or leave the assignment.

Contractor Action: They can request the threat in writing and remind the agency that enforcing PSL choice breaches the Conduct Regulations and may be reported to the relevant authorities.

The Industry Needs Transparency Not Control

The umbrella market has quietly become shaped by a small number of networks presented through multiple brand names. Combined with the widespread use of restrictive PSL lists this creates an environment that prioritises commercial interests over contractor protection.

Contractors must know their rights and exercise them. Agencies and end clients must ensure they are acting within the law rather than following internal preferences or agreements that restrict choice.

Conclusion

The UK contracting landscape is built on independence. Forcing contractors to use a narrow set of umbrella companies undermines that independence and breaches legislation designed to safeguard workers.

As the JSL regulations arrive in April 2026 the temptation for agencies to tighten control will increase. But doing so risks serious regulatory consequences and could expose contractors to non-compliant umbrella models.

The answer is simple. Contractors must be free to choose any compliant umbrella they want. Anything less is not only unfair but unlawful.